Monday, May 29, 2006

Bubble Sphere Roundup

Another week, another Bubble Sphere Roundup. :-) Why do I do the weekly Bubble Sphere Roundups?
  • There are so many informative postings on other housing bubble blogs out there
  • Bubble Meter gets tired of reading his own posts. ;-)
From our good friends up north, there is now the Calgary Contrarian. Welcome to the bubble sphere. Great Blog! While we are on the topic of Canadian housing bubble blogs , I should mention the superb Vancouver Housing Market Blog.

Southern California Blog has a wonderful post A Banquet Partaken in Anxiety

Jersey Shore bubble has a post titled 'I Knew I Saw More Boats for Sale' in which

Hawaii Housing Bubble is missing in action (MIA) as the blog has not been updated since April 19th. Too bad. :-( Also, not sure what happened to the OverValued and OverpricedDC Blogs. If anyone know please inform. Tubguy, presumably a troll, writes regarding the loss of Over Priced DC "ANOTHER ONE BITES THE DUST: ... Hahahaha, say goodbye, bubbleheads!"

Known for its, dramaticism and its excellent use of pictures, Housing Panic is sure to inform and get the message across. Thanks Keith. :-)

Check out a superb spoof of Freddie Mac's newspaper ads. Very Funny!

That is all folks!

72 comments:

  1. OverValued was a riot. I wish s/he had left it up even if active posting stopped.

    ReplyDelete
  2. I miss the biased-looking (in my opinion) photos of DC.

    David, can we get some more photos of the city you love? The love shines through in the way you frame the photos.

    bryce

    ReplyDelete
  3. bryce,

    More pics of DC will come. :-)

    ReplyDelete
  4. I bought my house just over a year ago, right at the peak.
    40% down (all my savings), old-fashioned 15 years
    fixed rate mortgage at 5.25%.

    I am regretting it because my budget is too tight (I can't travel AND
    save for retirement AND save for my kids' college education AND
    balance my budget) and the house is a bit too big for my needs and
    a bit too fancy for my taste. I am in a quandary as to what to do.
    Sell and lose the good mortgage rate and the broker's fees while having
    to compete with four or five similar houses that just came up for sale in
    my neighborhood? Put my saving for retirement on hold for a few years
    while I wait for this storm to be over before downsizing? Oh, what to do...

    My house is a solid house with no big flaws, in a prime neighborhood in a
    prime school district, so I will always be able to sell it even if the market
    is slow -- but at what price??

    This is all really stressful!

    ReplyDelete
  5. where is the house located?

    ReplyDelete
  6. "Tubguy, presumably a troll, writes regarding the loss of Over Priced DC "ANOTHER ONE BITES THE DUST: ... Hahahaha, say goodbye, bubbleheads!"
    "

    Your blog will be gone soon too. As your premise continues to prove false, you'll have less and less to write about.

    ReplyDelete
  7. anon,

    Keep drinking the Kool Aid.

    ReplyDelete
  8. "Keep drinking the Kool Aid. "

    The writing is on the wall, David. Hope you've enjoyed blogging. You're done.

    ReplyDelete
  9. I do enjoy blogging. Thank you very much. :-)

    I will continue to blog as this the housing market continues to decline.

    ReplyDelete
  10. "I will continue to blog as this the housing market continues to decline. "

    At some point, you, like your colleague at overpriceddc, will have to admit that you are wrong and (a) either convert your blog to a full time photo tour of the DC area; or (b) let it die. I'm hoping for (b).

    ReplyDelete
  11. We never have to admit anything and can, in fact, at any time claim victory and prove it with claims of rising rents, rising wages, and inflation figures of whatever it takes to support a "reversion to the mean" calculation.

    OK?

    ReplyDelete
  12. You're right, how silly of me. overpriceddc is obviously just resting.

    ReplyDelete
  13. For that matter we can even dismiss the median prices as "NAR propoganda" or "skewed" (my personal favorite) and claim the real median is whatever we want it to be in order to support our views.

    OK?

    ReplyDelete
  14. At some point, you, like your colleague at overpriceddc, will have to admit that you are wrong and (a) either convert your blog to a full time photo tour of the DC area; or (b) let it die. I'm hoping for (b).

    I'm curious as to what the author of this blog would consider a "victory," and when it could be declared.

    Would a 10% decline in DC housing prices real terms over the next two years be a victory?

    Or does it need to be a 40+% decline in real terms?

    It seems to me, if you are going to argue "bubble!" You have to have a substatial decrease in values.

    In the world of securities, a 10% decrease in an index is called a "correction," while a decline of 15% is called a "bear market." Not a "crash."

    The 1929 crash left stocks at more than 75% lower than their 1929 highs for 15 years. All the other "bubbles" like the South Sea bubble, the Tulip craze in Holland, all resulted in declines of more than 75% (or, in the case of the tulip craze, declines of 99.999%).

    Seems to me that if you are convinced that housing prices are a "bubble" (based, mind you, on 3.5% annualized real growth over the last 17 years since the last market high), you also have to commit to a very, very substantial pop of that bubble.

    Bubble's don't have corrections. They get popped.

    Of course, a bubble is just a metaphor...it's a shorthand for a set of market conditions.

    ReplyDelete
  15. David,

    Check out the photo gallaries associated with this Wash Post story. I cannot help but wonder why these photog's points of view are so very different from your own given that you love the history of my (not your) hometown. The difference is evident in the tone of the photos when compared to yours.

    http://www.washingtonpost.com/wp-dyn/content/article/2006/05/28/AR2006052800886_2.html

    ReplyDelete
  16. Supernova sir, we need not abide by the standards you proclaim or any others that do not support our position. We need only to make bold proclimations about the future that cannot be disproven, tie all past asset market behaviors to the last NASDQ crash, sprinkle our arguments with edgy, post-modern, techie-sounding phrases like "revert to the mean" and accuse all who disagree with us as being Realtors, NAR shills, or over-extended fearful home owners.

    OK?

    ReplyDelete
  17. David,

    I'm the one who posted the Post link above. Suggest looking closely at each and every photo for a true representation of what people who "love" DC look like and what they do with their time.

    Here it is in tinyurl format:

    http://tinyurl.com/fvv9w

    bryce

    ReplyDelete
  18. Some lovely pictures of alleys in DC. Its great to see people moving back to the long neglected alley streets. Some wonderful renovations have indeed occured in alley streets. I fully support what these fine folks.

    ReplyDelete
  19. supernova said:
    I'm curious as to what the author of this blog would consider a "victory," and when it could be declared.

    Good question. I think it will be when the "bubble non-believers" accept that this was indeed a bubble.

    What will be that threshold?
    Hmmm. When the non-believers start seeing negative equity in their homes.

    The DC Area seems to be ahead in the race for a bust. Such a marked decline from the peak is not yet visible in any other markets, just yet.

    WDC Median Graph

    ReplyDelete
  20. I like the "Greater Washington DC" graph.

    Oddly, it doesn't include Washington, DC.

    eh, no biggie. Minor oversight of a major international city. Easy to do if you are narrow-minded enough, I suppose. What else would explain it?


    bryce

    ReplyDelete
  21. Good point. Please stop the name calling.

    Perhaps the data was unavailable.

    ReplyDelete
  22. Thanks David.

    "Oddly, it doesn't include Washington, DC"

    If you followed the links to VA & MD
    realtors, neither of them publish figures
    for the DC Area.

    Learn to look a bit deeper. A quick jump to conclusion, just like there is no bubble.

    Look at what it shows, A lot more than what it is missing.

    ReplyDelete
  23. For those who don't like this blog... move on and don't read it. You sound like a bunch of schools kids here calling names. Let this person have their blog, and if you disagree start your own blog about how strong the real estate market is. A good starting place would be www.blogspot.com.

    ReplyDelete
  24. "If you followed the links to VA & MD
    realtors, neither of them publish figures
    for the DC Area.

    Learn to look a bit deeper. A quick jump to conclusion, just like there is no bubble."

    What you've just said makes no sense. We have a graph titled "Washington DC" with no data about Washington DC. That's it. That is all.

    And yes, it takes a narrow mindset to not see that a graph titled "Washington DC" does NOT include data pertaining to Washington DC.

    ReplyDelete
  25. Good question. I think it will be when the "bubble non-believers" accept that this was indeed a bubble.

    What will be that threshold?
    Hmmm. When the non-believers start seeing negative equity in their homes.


    So you get to declare victory when a set of people believes there was a bubble? Not any empirical measurement? Wow, that's an interesting yardstick.

    I don't believe there is a bubble. I bought my current home in 2000, and unless a thermonuclear weapon detonates at 8th & Pennsylvania, I ain't going to negative equity. So I guess you'll never be able to declare victory based on what I believe.

    I'll state it again. A "bubble" is a metaphor, nothing more. It's something people use as a heuristic device to describe a set of market conditions (not exhaustive):

    (1) rapid appreciation of an asset;
    (2) the disconnection of the price of the asset with the historic measurements of the economic value of the asset;
    (3) the creation of artificial demand for the asset by those who do not intend to make economic use of the asset;
    (4) the lack of sustainability of the demand.

    Within these four conditions, it could be argued as to what quantitative measures would qualify as a bubble. Is 10% price appreciation in a single year a bubble increase? How about 100% over 5 years (which, roughly speaking, is 14% annualized). But what if the period before the increase was characterized by price decreases? It looks like more of a recovery.

    As I've posted in the other comments, the growth in the Dow Jones Industrial average over the past 30 years has far, far exceeded the growth of housing prices. Yet noone is calling a DJIA bubble.

    Even more arguable is #2 - the disconnection of prices with historic measurements of economic value. Here's where I think the bubbleheads are most wrong. I don't think there is a disconnect between the current housing prices in DC with the historic measurements of economic value. As an initial matter, we were in the low range of housing prices when the boom began in 1999/2000. So the first couple of years of the housing boom could rightly be described as a recovery from a very tough 10 year period of real negative returns in residential real estate. Second, in the meantime, new financial products have come on the market to make buying a home more affordable to a larger percentage of the population. You wouldn't compare the growth in housing prices before and after the creation of the 30-year mortgage and the 20% down payment, would you? I think there has been a fundamental shift in the supply/demand curve for housing. That in itself supports higher housing prices.
    Third, while I've seen data that suggests that valuations are in the high range of historical measurements of economic value, I haven't seen any data that indicate that prices have been disconnected from value. Lenders do have underwriting standards that at least try to put people in houses they can afford. If a large percentage of the prices people were paying were at mortgages at 200% of their monthly after tax income, with their only hope of making the payments is to sell the property, yeah, that's a bubble.

    Creation of artificial demand through speculators. Yeah, we've got that. But this is not in itself enough to create a bubble. Given that essentially all owners of tech stocks have no intention of making economic use of those stocks, one could say that the NASDAQ is a 100% "flipper" market. But it's not a bubble right now. (Mind you, financial stocks can produce economic value to a SH if they throw off dividends. I have a large number of dividend paying stocks, which I prefer to more speculative growth stocks).

    Lack of sustainability of demand. Yeah, I think you've got that in this market. But, again, it's a question of measurement. If 10% of the demand for housing can't be sustained, that's a big difference from the near 100% of demand that couldn't be sustained in the Tulip Craze.

    So I don't think that the DC Market is a bubble. I think prices are high by historic measures of value, and that they are likely to decline. But prices aren't divorced from economic value.

    Economics also tells me that as prices decline, demand picks up, slowing the price decreases. That's why I see a 5-7% nominal drop in prices over the next 2 years, not some "bubble-burst" 50% drop, which I consider preposterous.

    ReplyDelete
  26. "And yes, it takes a narrow mindset to not see that a graph titled "Washington DC" does NOT include data pertaining to Washington DC."

    When you run out of arguments and also any data to support your beliefs,
    this kind of reaction is pretty much
    expected.

    But the best is yet to come.

    So I suggest the bubble non-believers stay around and we will love to hear your screams, as the water starts rising upto your heads.

    ReplyDelete
  27. "we will love to hear your screams"

    HAHA! LOL!

    "this kind of reaction is pretty much
    expected."

    Yes, making a simple, easy to comprehend point about the incompleteness of that chart is analogous to grasping at straws. Brilliant.

    bryce

    ReplyDelete
  28. I think even if DC data was available, looking at the
    other 5 lines, I dont think it would be much different.

    And again, save some of your screams for later.
    You are gonna need them. Lots of them.

    ReplyDelete
  29. "And again, save some of your screams for later.
    You are gonna need them. Lots of them."

    LOL! OMG! I feel like I'm watching an excerpt from a bad Vincent Price movie.

    bryce

    ReplyDelete
  30. No you are not watching it, you are in it.

    And it is not a movie, it is for real.

    ReplyDelete
  31. "So you get to declare victory when a set of people believes there was a bubble? Not any empirical measurement? Wow, that's an interesting yardstick."

    I already said negative home equity is the yardstick.
    Let me qualify it by saying those who purchased 2003 or later
    with no money down, have a -ve equity.

    "As I've posted in the other comments, the growth in the Dow Jones Industrial average over the past 30 years has far, far exceeded the growth of housing prices. Yet noone is calling a DJIA bubble."

    I called Dow and S&P 500 a bubble in the previous thread yesterday.
    The Dow tripled between 1994 and 1999. These two will blow up as well
    along with the housing bubble.

    As far as you buying in 2000, and will not have -ve equity.
    Don't be so sure. When the market takes a dive, the momentum
    takes it below where the overvaluation started.

    And if you take into account the implosion of the Equity Markets
    as well. Home prices may not even come back to the 2000 level for
    a long long time.

    And yes owning dividend paying stocks is better than owning "growth"
    stocks in todays market. But dont count on capital gains or the same
    level of dividends.

    "I think there has been a fundamental shift in the supply/demand curve for housing."

    There has been a shift in the demand. But todays "demand" is so out of whack with
    "need". Of the 125M houses , 16M are sitting empty.
    I dont want to repeat the same things I wrote in the previous thread yesterday.

    The demand will have to adjust downwards to align with "need".

    ReplyDelete
  32. "I called Dow and S&P 500 a bubble in the previous thread yesterday.
    The Dow tripled between 1994 and 1999. These two will blow up as well
    along with the housing bubble."

    Please do some research on GDP from 1994 through 2005 and then correlate that information with your assertations.

    Is GDP down for 1Q 2006 compared to 1Q 2005?

    ReplyDelete
  33. "Please do some research on GDP from 1994 through 2005 and then correlate that information with your assertations."

    I have studied GDP and Housing Valuations from 1945 to 2005.

    Adjust your GDP numbers for inflation and population growth
    and let me know what you find out.

    The Historic Flow of Funds reports are available
    on Federal Reserve's website.

    ReplyDelete
  34. As far as you buying in 2000, and will not have -ve equity.
    Don't be so sure. When the market takes a dive, the momentum
    takes it below where the overvaluation started.


    Hey, if I take a dive into negative equity, I'll admit I'm wrong. Hell, I might even share my cat food with you. Because it's all we are going to eat.

    And when did the overvaluation start? Seems like you have to answer that question first.

    And by what measures are you saying there is an overvaluation? If it's by 5%, then a "crash" of 7% is what you are saying?

    Let me ask you this - have housing prices ever been undervalued? Can you disprove that this is just an overreaction to that?

    "I think there has been a fundamental shift in the supply/demand curve for housing."

    There has been a shift in the demand. But todays "demand" is so out of whack with
    "need". Of the 125M houses , 16M are sitting empty.
    I dont want to repeat the same things I wrote in the previous thread yesterday.


    What in the hell does need have to do with it? I don't need another month of my XM subscription, but I'll pay for it anyway. There is no "need." There is only supply and demand. Sheesh.

    Do you know the historic ratio of empty units vs. total units? 12% is not grossly distorted compared to historic levels. There is always some creative destruction in housing. New housing replaces old housing. Old, decrepit housing stock is demolished and replaced with commercial real estate. Relocations leave the rust belt with fewer people and less demand for housing. Sure, there are boarded up houses everywhere. But that's part of the system.

    ReplyDelete
  35. "Adjust your GDP numbers for inflation and population growth
    and let me know what you find out."

    Adjust your assumptions to include consumption and exhaustion of available land near employment centers; juxtaposed with said population growth, and let me know what you find out.

    ReplyDelete
  36. "What in the hell does need have to do with it?"

    At least 10M of these will be put for sale as these are for pure investment purposes.

    Take a guess what that does to your demand/supply curve.

    ReplyDelete
  37. "Adjust your assumptions to include consumption and exhaustion of available land near employment centers; juxtaposed with said population growth, and let me know what you find out."

    These factors are already built into the GDP numbers. Whereas inflation and population growth are not.
    1% population growth and 3.5% inflation.
    4.5% growth in GDP prolly does'nt mean a whole lot.

    ReplyDelete
  38. At least 10M of these will be put for sale as these are for pure investment purposes.

    Take a guess what that does to your demand/supply curve.


    Oh really? You did a census of the 16 million units? Share your results, please.

    There are always going to be a fair number of homes empty because of dislocation of jobs, deaths, etc. 12% of housing units doesn't surprise me at all. A landlord in a big rental building usually isn't fazed by 88% occupancy.

    If you could show me that 10 million homes are going on the market in the next few months, sure, I'll buy a big decrease in prices (but not 40%). But unless and until I see some data backing that up, I'll take it you just pulled that number out of you ass.

    ReplyDelete
  39. "Oh really? You did a census of the 16 million units? Share your results, please."

    Please. I dont do it, I can't possibly do it.
    The Census Bureau does it.
    http://www.census.gov/hhes/www/housing/hvs/historic/histtab8.html

    "12% of housing units doesn't surprise me at all. A landlord in a big rental building usually isn't fazed by 88% occupancy."

    The landlord in a big building includes and disperses the cost
    to existing tenants, to cover the units in rotation.

    Most of these empty homes can be presumed to be
    second homes.
    So 50% owner occupied, and 50% empty.

    Any landlord will go broke maintaining 50% vacancy in his
    rental complex, when the complex itself is depreciating in
    value.

    "I'll take it you just pulled that number out of you ass"

    I think you should get ready to take it up your ass now.

    ReplyDelete
  40. "These factors are already built into the GDP numbers."

    Now you've convinced me. I am 100% certain that you have no idea what you are talking about.

    ReplyDelete
  41. I was 100% convinced from your very first post, that you had no idea what you were talking about.

    ReplyDelete
  42. "I was 100% convinced from your very first post, that you had no idea what you were talking about."

    Pure genius.

    ReplyDelete
  43. Please. I dont do it, I can't possibly do it.
    The Census Bureau does it.
    http://www.census.gov/hhes/www/housing/hvs/historic/histtab8.html


    Did you even look at this data before posting it?

    I guess I should give you credit for trying to look for a source of data. That's a step in the right direction.

    The next step: reading the data.

    In 1998, 11.7% of all housing units were vacant. And that was indisputably before any "bubble" started.

    You know what all the speculators have driven that number up to? 12.8%! A 1.1 percentage point increase!

    And in 1998, did 8 million of the 13 million vacant units suddenly go on the market? Nope.

    I mean, is there any basis for your statement that 10 of the 16 million vacant homes are going to go on the market other than that you WISH it would happen?

    Most of these empty homes can be presumed to be
    second homes.
    So 50% owner occupied, and 50% empty.

    Any landlord will go broke maintaining 50% vacancy in his
    rental complex, when the complex itself is depreciating in
    value.


    Well, the 50% number, I assume, is once again a fictional creation of your gastrointestinal tract, but I'll humor you.

    If I owned a 10 unit apartment building I bought for $1 million in 1992, and was able to rent out units for $1800 per month, and had 50% occupancy, I would be grossing $9000 in rent per month. Let's assumed I financed the building with 20% cash down and took out a loan at 7%. P&I would be $5300 per month. I net $3700 per month before taxes and maintenance. Let's assume $2500 per month in taxes and maintenance. That's a lot - $250 per unit. I still net $1200 per month and have a cash flow of $14,400 per year on the property. That's a 7.2% annual return on my initial $200k investment.
    Don't think I'm going broke on that. Not rich, but not broke.

    ReplyDelete
  44. When it is called second home. It means
    the first one is the primary residence
    and the second one is empty for a given owner.
    So one home occupied (50% occupancy),
    and one empty (50% vacancy).

    "If I owned a 10 unit apartment building I bought for $1 million in 1992, ........... That's a 7.2% annual return on my initial $200k investment."

    This sure is some hot air coming out of your ass.
    Where did you get these from?

    "I'll humor you
    Please dont humor me. I have no sense of
    humour went it comes to Housing and the US Economy.
    It is dead serious business.

    ReplyDelete
  45. This sure is some hot air coming out of your ass.
    Where did you get these from?


    Geebus, those are conservative numbers. I could easily have purchased an entire 8-unit building in Rosslyn in 1997-98 for a total of $750k. I priced it out. The units - and I just checked - are currently renting for $1500 each. 4 out 8 rented, and that's $6000 in income per month.

    $150k down, 600k loan for 7%, $4,000 per month in payments. Add in $200 per unit per month for taxes & maintenance (less expensive property=lower taxes), and I've still got a $400 per month profit. $4,800 per year in cash flow, a low return, but I'm not losing money.

    ReplyDelete
  46. You must be buying it
    in Huntsville, Alabama
    and renting it in
    Los Angeles, California.

    ReplyDelete
  47. "I live in a building with 16 units."

    Clearly, your particular circumstance is applicable across all possible scenarios.


    Mind you, he was the one that first raised the concept that it was *impossible* to make money with 50% occupancy. Of course it's not impossible. I just gave him one scenario. You can lose money with 100% occupancy, too.

    But he told us all we needed to know when he said that he lives in a building in 16 units.

    He's trying to WISH the market into a crash so he can put down 0% and get a 1-year ARM on a 4 BR house in Lyon Village for $300k. He doesn't realize that he would never be able to afford that because the economic conditions precipitating and succeeding that would be so severe that he couldn't afford the place he currently lives in.

    The 55%-70% declines the bubbleheads talk about - after only a 3.5% annualized real return in the residential real estate market since the last top in 1989 - is so absurd they probably can't comprehend it.

    In New Orleans, the average selling price of a home has dropped from $111,500 to $59,500 since Katrina. That's a 45-50% drop. *THE CITY WAS EFFECTIVELY DESTROYED, MOST OF THE POPULATION NO LONGER LIVES THERE AND REAL ESTATE PRICES ONLY DROPPED 45-50%* Mind you, that doesn't even adjust for the repair/replacement costs implicit in those prices. Plug those prices back in, and you've got a much smaller drop.

    Now, does a 1996 inventory level in the DC market scare you as much?

    ReplyDelete
  48. supernova, stop embarassing yourself.
    You are not that super afterall.

    Check out the latest thread on inventory
    David posted.

    Looks like Some of those 16M homes are already
    on the market.


    "He's trying to WISH the market into a crash so he can put down 0% and get a 1-year ARM on a 4 BR house in Lyon Village for $300k."


    No I will buy a 2BDR for 50K cash in a foreclosure auction
    a few years from now.
    It might be yours :)

    My weekend is up.
    I will catch up with you folks at a later day.
    Bye.

    ReplyDelete
  49. supernova, stop embarassing yourself.
    You are not that super afterall.

    Check out the latest thread on inventory
    David posted.

    Looks like Some of those 16M homes are already
    on the market.


    Well, if you do buy a 50k 2BR and it's my place, it probably will be worth only 50K. After all, it will have to have had a bunch of square footage torn out. Probably open to the outside air, too.

    David's post on inventory shows that inventory is growing. No one disputes that. But a 37% increase in inventory YOY does not automatically mean a crash in house prices of 50% or more. Remember that inventory was at low levels last year - these current levels are more normal. David didn't post the inventory figures for the prior 10 years to put the 2006 figures in context.

    Just keep wishing for that $50k two bedroom, buddy. Keep wishing. While you're at it, buy some tin foil. You might find it comfortable to wear around your head.

    ReplyDelete
  50. "David didn't post the inventory figures for the prior 10 years to put the 2006 figures in context.
    "

    He never does. David only posts selective data that supports his preferred conclusion.

    ReplyDelete
  51. "supernova, stop embarassing yourself.
    You are not that super afterall."

    Actually, he's clobbering you.

    ReplyDelete
  52. Wow, Supernova applied a beating. I can't remember ever seeing such well thought posts, and completely futile attempts at responding.

    ReplyDelete
  53. Hoofah!

    Another thread where bubbleheads got a major economics and finance spanking!

    Seems like the only retorts that bubbleheads can muster is either:

    a) Yeah, well you're going to be crying about your home price when the bubble bursts at some point in time!

    or

    b) whatever, ignore the trolls who are really just real estate agents or speculators looking to flip their money losing properties.

    I also notice that David is oddly missing from these threads and hasn't countered any of the arguments put up by the non-bubbleheads.

    ReplyDelete
  54. fritz,

    I do NOT have time to argue and each and every point presented by the housingheads on this site.

    ReplyDelete
  55. Well, if there’s no problem, why are they posting comments?

    Well, if the bubble is so obvious and irrefutable, why would you need to post as well?

    ReplyDelete
  56. Hey, are you seeing the data I'm seeing. "Yep" OK, thought so.

    That's why.

    Why are you here?

    ReplyDelete
  57. Super dude

    Is inverntory up?

    Are forclosures up?

    Are interest rates up?

    Are sales down?

    Are homes sitting on the market longer?

    ReplyDelete
  58. David:

    It's not that you aren't arguing "each and every point"; it's that you aren't responding to ANY of the arguments raised by Supernova and others.

    If one is convinced about there being a housing bubble, then it should be fairly simple to swat away any red herrings raised by non-bubbleheads.

    Also, doesn't Anonymous at 9:20 AM's post qualify as a personal attack that violates blog rules?

    ReplyDelete
  59. Anonymous said...
    Super dude

    Is inverntory up?

    Are forclosures up?

    Are interest rates up?

    Are sales down?

    Are homes sitting on the market longer?


    I could answer those questions, but they wouldn't be the relevant questions - they are only half of the relevant questions.

    Here's an example you might understand. You own a mutual fund that is worth $1000 in year one. It drops to $700 in year two, then rises to $800 in year three. From year 2 to year 3, it increases in value by 14%. Does that make it a great investment? Sure as hell it doesn't, you're down 20%.

    That's why asking what inventory is today compared to last year only gives you part of the picture. Sure, inventory is up. But was last year's inventory low? If it was, then isn't it the case that inventory may just be "normal" now?

    Higher inventory leads, all other things being equal, to lower relative prices. But it doesn't necessarily lead to lower actual prices.

    Say in "hot market 1" inventory was at 10,000, which produced price increases of 20%. A year later, inventory has increased to 13,000. Does that mean that prices are going to fall? No. It just means that prices will be lower, all things being equal, than if inventory was at 10,000. It could be that at inventory 10,000 in Year 2, prices would be up 25%, and at inventory 13,000, prices would be up 5%.

    So unless and until you tell me what inventory was from 1989-2006, saying "inventory is up" is totally meaningless.

    I'll give you a BETTER example. Interest rates are 6.62% on the 30-year right now, right? Well, in 2000, interest rates were in the 8-8.5% range. Did prices go down in 2000? No, it was the beginning of the hot market. So when you say interest rates are up, sure, that will decrease demand, but the absolute level of interest rates is still actually LOWER than when the boom started. So, all other things being equal, demand should still be higher in 2006 than it was at the beginning of the boom in 2000.

    The same is all true of foreclosures, etc. You need more than one figure - you need context. Like that cockamamie stat posted about 16 million homes being vacant - which is only 1.7 percentage points higher than it was in the still-stangnat housing market of 1998.

    ReplyDelete
  60. supernova,

    Looks like you are really good with numbers.

    You should check out the home page of the link
    he posted yesterday.

    http://www.housingbubblebust.com

    It has a lot of Housing related data.

    ReplyDelete
  61. You should check out the home page of the link
    he posted yesterday.

    http://www.housingbubblebust.com


    I did take the time to check that link yesterday. It had some numbers, but again, not the relevant one. Indeed, the first number cited on the main page is the 16 million vacant homes figure.....which is meaningless given that figure is not much higher than the level of vacancies in 1998, before the boom.

    I mean, if 11% vacant homes in 1965, 1975, and 1998 didn't mean a crash in prices, why would 12% vacant homes in 2006 mean a crash in prices?

    There's no question that supply is increasing faster than demand, and that demand is perhaps contracting. But that doesn't mean that we will see a "crash" of 20+% price decreases. If you are holding out for that...well, don't put your money in the stock market while you are waiting. Because even if you are right, you'll have less money than you do now.

    (If you want to stick your money somewhere, try Canada).

    ReplyDelete
  62. Super dude
    ….I could answer those questions, but they wouldn't be the relevant questions - they are only half of the relevant questions…..

    ……Higher inventory leads, all other things being equal, to lower relative prices. But it doesn't necessarily lead to lower actual prices…….

    OK I see, so when the bank takes your home just tell them “ Hey I know I paid $500K for it, but now it’s worth $250K so I only owe for the $250K that it’s “relatively worth” right?

    ReplyDelete
  63. OK I see, so when the bank takes your home just tell them “ Hey I know I paid $500K for it, but now it’s worth $250K so I only owe for the $250K that it’s “relatively worth” right?

    Well, if you don't understand basic economics, I'm not going to respond.

    You've demonstrated one thing in this thread. Not that there is any kind of bubble, or that it will pop, but that you have no minimal understanding of what you talking about.

    ReplyDelete
  64. "you have no minimal understanding of what you talking about."

    Like you have? If you did, you would be
    selling your house right now.

    Looks like that 16M empty homes has
    really scared you.

    ReplyDelete
  65. “Anonymous said...
    Looks like that 16M empty homes has
    really scared you.”

    Haven’t you heard? Inventory and empty homes do not matter.

    “……….I mean, if 11% vacant homes in 1965, 1975, and 1998 didn't mean a crash in prices, why would 12% vacant homes in 2006 mean a crash in prices?........”

    It’s all relative. Everything was rosy in 1965,’75 and ’98 when we were seeing $100K in equity month to month and HELOC’ed up to our eyeballs. Remember, real estate never goes down (relatively). So when the bank is about to foreclose on your $500K home, just tell them “relatively” it’s worth $250K (compared to the other 20000 homes on the market) Not only will the debt be forgiven, they’ll cut you a check $250K difference. So you see, you “really” haven’t lost any equity.


    Also, everything else remains equal. So, to those empty 16M homes, they are adding more empty homes to the market every day, it all equals out in the end.

    ReplyDelete
  66. And you can also make money as landlord
    even with 50% occupancy.

    And the half a million new homes for sale will all equal out in the end.

    ReplyDelete
  67. "I mean, if 11% vacant homes in 1965, 1975, and 1998 didn't mean a crash in prices, why would 12% vacant homes in 2006 mean a crash in prices?"

    Yep the market did'nt crash in 1965,1975 or 1988( expect two local ones Boston and Los Angeles).

    These numbers are nationally.

    The Market is crashing in 2006.
    That's the difference.

    Nobody holds an asset that is
    loosing value.

    ReplyDelete
  68. Nobody holds an asset that is
    loosing value.


    Except maybe their cars.

    Or their computers.

    Or their televisions.

    Or their clothes.

    ReplyDelete
  69. No one takes on an I/O, negative amortization loan for

    Their cars

    Or Computers

    Or Televisions

    Or Clothes

    ReplyDelete
  70. I dont know any one buying

    Cars

    Or computers

    Or televisions

    Or clothes

    as Investments.

    ReplyDelete